Stay informed with free updates
Sign up on the bus. Geopolitics myFT Digest — delivered straight to your inbox.
As a triumphant Donald Trump brings the “America First” ideology back to the White House, leaders across the Atlantic are facing the reality of “Europe, alone.” They should be ready: for eight years they have openly acknowledged the need for Europe to get back on its feet. Yet they feel shortchanged, as if the pupils had put off their homework until the last minute.
However, it is clear what Europe’s goals should be now – and they are shared by EU members and non-members alike. Denying Russia’s Vladimir Putin a breakthrough in Ukraine would encourage him to deepen the threat to their own liberties as liberal democracies. Achieve a carbon transition that will reduce the interconnected risk of climate change and destabilizing Europe’s energy dependence. Promote domestic innovation and investment to improve productivity so as not to be at the mercy of technology and development from elsewhere.
Although some put it that way, leaders know they have to make Europe great again. But all the best intentions rest on an inability, so far, to achieve these goals. Many good policy ideas – such as those in recent reports by Enrico Letta and Mario Draghi – get a nod, then the question: But where will the money come from?
There is a lot of learned helplessness here. Of course, there are big questions about the EU budget and national and joint debt. But even without major changes to the EU budget, Europe – and the EU in particular – has far more resources available to it than it cares to admit.
Start with Ukraine, which must now be ready to fully fund Europe on its own. If Ukraine loses the battle for Putin’s victory, it is Europe’s security that is permanently weakened, and its geopolitical sovereignty destroyed. In its own interest, Europe must fill the hole left by the definitive end of US support.
For half a year, Europe and the outgoing Biden administration have worked to funnel $50bn into Western financial institutions on future private profits from dormant Russian state money. Maybe they’ll get it across the line before the power change in Washington, but that’s barely enough to get Ukraine through the winter. Better yet would be to seize the entire $300bn or so of Russian state assets.
It is in the hands of Europe. Most of it is held in the Belgian securities depository Euroclear due to EU sanctions, with some in other European institutions (including the UK). The legal debate is over, with at least two viable paths to occupation identified: one based on retaliatory measures against Russia’s violations of international law, the other on ending mutual claims (this Moscow’s irrefutable and enormous financial obligations in the case of Ukraine).
It comes down to the political will of Europe. Western governments have repeatedly vowed to withhold the reserves until Moscow pays what it owes to Kiev. The forfeiture and transfer shall give effect immediately to this obligation.
What about Europe’s own defense and investment needs? Politicians naturally want the private sector to provide as much funding as possible, and look to institutions like the European Investment Bank to attract large chunks of private funding with a thin slice of public spending. They rarely mention that, whatever the financial engineering, private funds have to come from somewhere: original resources have to be diverted from their current uses if they are to provide new funds.
This is a challenge for a country like the UK, whose long-running current account deficit means that new priorities must be funded largely from redeployed resources already deployed domestically. But the EU has a large current account surplus. EU leaders cannot in good faith argue that resources are lacking when the bloc saved an extra €450bn in the last four quarters, largely exported to other G7 economies and foreign financial centres.
The point is not to target small surpluses. As Trump is about to find out, a particular external balance is difficult to target because it reflects domestic saving and investment choices. But EU leaders must be clear that the world in which European economic transformation can most easily succeed is one in which the EU is no longer a surplus economy but uses all its domestic resources, imports is comfortable about and graduated from over-reliance on exports. demand
It’s a big mental shift, but one that’s well-suited for business elites bent on rebalancing the global economy. The task of the European Union is to restore this balance in the interests of Europe.
martin.sandbu@ft.com
